2006–2010

Job Search and Mobility in Developing Countries. Theory and Policy Implications

Reprint No. 2008:11

Author(s): Yves ZenouYear: 2008 Title: Journal of Development Economics Volume (No.): 86 (2) Pages: 336–355


A labor market model is developed in which the formal sector is characterized by search frictions whereas the informal sector is competitive. We show that there exists a unique steady-state equilibrium in this dual economy. We then consider different policies financed by a tax on firms' profits. We find that reducing the unemployment benefit or the firms' entry cost in the formal sector induces higher job creation and formal employment, reduces the size of the informal sector but has an ambiguous effect on wages. We also find that an employment/wage subsidy policy and a hiring subsidy policy have different implications. In particular, the former increases the size of the informal sector while the latter decreases it.


Reference:
Zenou, Yves (2008), "Job Search and Mobility in Developing Countries. Theory and Policy Implications". Journal of Development Economics 86(2), 336–355.

Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

About the book

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